We will distinguish a Ground Lease, which is related but different, from a Triple Net NNN Lease. A Triple Net lease or a NNN lease provides a stable income to the investor, landlord or owner, with least management responsibilities. When landlords, owners or investors choose a Triple Net lease structure, they are most likely thinking of a commercial property comprised of creditworthy, national tenants.
What is a Ground Lease? ( Land Ownership)
A Ground lease is a long term agreement between the tenant and the owner with respect to the use and lease of the land. In this, the tenant is allowed to construct a property over the land during the lease tenure, up to 99 years. By the end of the ground lease term, the land with all the improvements is now owned by the property owner, until and unless an exception is created. By the end of the NNN lease, the ownership of any building constructed by the tenant is transferred to the owner of the land.
What is a Triple Net Lease? ( Land and Building Ownership)
On the other hand, in a Triple Net NNN lease. Landlord leases the land and the building he owns to the tenant. The tenant makes an improvement to the building and starts his business and pays for all repairs and maintenance. The biggest benefit of a NNN lease vs Ground lease is that in NNN lease landlord gets to depreciate the building vs the ground lease while the tenant gets to depreciate the building.
Ground lease vs NNN fee simple
- A NNN fee simple property conveys the rights of owning the land outright, as well as the rights to develop and tenant the land (and building), without condition of time or any other.
- Ground leases do not convey the rights of ownership of the land, only tenancy of the land is “sold” for a long term upto 99 years. In the sense of unconditional ownership, it is inferior to a NNN lease fee simple, but can be better than a Triple Net lease only.
Investing in ground Leases or Net Leased Real Estate
Technically speaking, a ground
Lease is a refined form of a Triple Net Lease. Both types of leases have
investing nuance that requires deep analysis and understanding, by contacting and engaging NNN Triple Net brokers.